ID :
27828
Sat, 11/01/2008 - 05:50
Auther :
Shortlink :
http://m.oananews.org//node/27828
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B.o.J. slashes benchmark by 20 bps; sees economic sluggishness
London, Oct 31 (PTI) In yet another effort to enhance liquidity in the country's financial system, the Bank of Japan (B.o.J.) Friday slashed the benchmark rate to 0.3 percent, for the first time in seven years, even as the apex bank warned of sluggish economic activity in the coming quarters.
Joining central banks worldwide, Japan's apex bank has cut the overnight call rate by 20 basis points to 0.3 percent. Earlier the rate was at 0.5 percent.
The move follows Japanese Prime Minister Taro Aso unveiling an economic stimulus package worth about 275 billion dollars yesterday.
"Adjustments in the world economy stemming from financial crises in the U.S. and Europe have further increased in severity. Under these circumstances, increased sluggishness in Japan's economic activity will likely remain over the next several quarters with exports leveling off and the effects of earlier increases in energy and materials prices persisting," B.o.J. said in a statement Friday.
The decision to slash the rate comes two days after the U.S. Federal Reserve cut rates by 0.5 percent point to one percent.
China, Hong Kong and Taiwan have also cut rates this week while the European Central Bank is expected to follow suit next week, in the wake of deteriorating economic conditions.
Further, to ensure stability in money markets, the central bank has introduced complementary deposit facility. The temporary measure is aimed at paying interest on excess reserve balances to further facilitate the provisioning of sufficient liquidity toward the year-end and the fiscal closure.
"This measure will be effective from the November reserve
maintenance period to the March 2009 reserve maintenance period, and the interest rate applied will be 0.1 percent," the B.o.J. statement added.
In addition, the bank changed the basic loan rates applicable under the complementary lending facility by 25 basis points to 0.5 percent with immediate effect.
Meanwhile, B.o.J. also noted, "the outlook for economic activity and prices is attended by increased downside risks to economic activity but also by decreased upside risks to inflation relative to the recent past".
"Projection for the second half of fiscal 2008 through fiscal 2010 is that increased sluggishness in economic activity would likely remain until around the middle of fiscal 2009," B.o.J. said.
During this period, domestic private demand is likely to be relatively weak due mainly to the earlier deterioration in the terms of trade, the statement said.
Moreover, exports are also expected to weaken somewhat against the backdrop of the slowdown in overseas economies and the appreciation of the Yen.
Thereafter, the growth rate is expected to pick up gradually, as the effects of earlier increases in energy and materials prices abate and overseas economies move out of their deceleration phase, although the timing is likely to be sometime after the middle of fiscal 2009, it added.
"The bank would continue to do its utmost to facilitate a return of Japan's economy to its sustainable growth path with price stability through maintaining accommodative financial conditions," the statement said. PTI
Joining central banks worldwide, Japan's apex bank has cut the overnight call rate by 20 basis points to 0.3 percent. Earlier the rate was at 0.5 percent.
The move follows Japanese Prime Minister Taro Aso unveiling an economic stimulus package worth about 275 billion dollars yesterday.
"Adjustments in the world economy stemming from financial crises in the U.S. and Europe have further increased in severity. Under these circumstances, increased sluggishness in Japan's economic activity will likely remain over the next several quarters with exports leveling off and the effects of earlier increases in energy and materials prices persisting," B.o.J. said in a statement Friday.
The decision to slash the rate comes two days after the U.S. Federal Reserve cut rates by 0.5 percent point to one percent.
China, Hong Kong and Taiwan have also cut rates this week while the European Central Bank is expected to follow suit next week, in the wake of deteriorating economic conditions.
Further, to ensure stability in money markets, the central bank has introduced complementary deposit facility. The temporary measure is aimed at paying interest on excess reserve balances to further facilitate the provisioning of sufficient liquidity toward the year-end and the fiscal closure.
"This measure will be effective from the November reserve
maintenance period to the March 2009 reserve maintenance period, and the interest rate applied will be 0.1 percent," the B.o.J. statement added.
In addition, the bank changed the basic loan rates applicable under the complementary lending facility by 25 basis points to 0.5 percent with immediate effect.
Meanwhile, B.o.J. also noted, "the outlook for economic activity and prices is attended by increased downside risks to economic activity but also by decreased upside risks to inflation relative to the recent past".
"Projection for the second half of fiscal 2008 through fiscal 2010 is that increased sluggishness in economic activity would likely remain until around the middle of fiscal 2009," B.o.J. said.
During this period, domestic private demand is likely to be relatively weak due mainly to the earlier deterioration in the terms of trade, the statement said.
Moreover, exports are also expected to weaken somewhat against the backdrop of the slowdown in overseas economies and the appreciation of the Yen.
Thereafter, the growth rate is expected to pick up gradually, as the effects of earlier increases in energy and materials prices abate and overseas economies move out of their deceleration phase, although the timing is likely to be sometime after the middle of fiscal 2009, it added.
"The bank would continue to do its utmost to facilitate a return of Japan's economy to its sustainable growth path with price stability through maintaining accommodative financial conditions," the statement said. PTI
